Their Money Lies Over the Sea

In the good days, when American Radiator and Standard Sanitary Co. were separate companies making (together) $20,000,000 a year (their joint 1939 net profit: $3,712,193), U. S. plumbing was both the butt and admiration of Europeans. Radiator's chairman was autocratic Clarence Mott Woolley. By the time they consolidated in 1929, they had an estimated stake of $35,000,000 in foreign plants to make goods that would raise Europe's standard of plumbing to that of the U. S. Of their 15 European plants, nearly half were in Germany, Austria, Italy, Spain. In that era U. S. building was booming. Radiator had no debt to speak of, nor any better use for its surplus funds; European living standards had a long way to go. For some years around 40% of Radiator's profits came from its foreign subsidiaries. Last week more of that story was told.

During Depression, Europe went sour. At the end of 1931, Radiator still had cash of $20,061,000, $2,244,000 more than its funded debt plus current liabilities. Next year, with business collapsing, the company took an $18,568,000 charge-off against its $68,770,779 accumulated surplus.

By end of 1938, 75-year-old Chairman Woolley had given way to a tightlipped, hardboiled, 58-year-old chairman, Henry M. Reed, who was given the green light by Radiator's bankers (J. P. Morgan & Co.), told to straighten out its rambling financial structure. One of Reed's first moves was to purge $8,730,703 of German and Italian "assets" from the company's consolidated accounts.

Last year, World War II piled up trouble for Radiator's properties in the democracies. Actually the European subsidiaries were not losing money. But for any use they were to American Radiator their profits might as well have been at the bottom of the ocean.

By end of last year, Radiator's European write-offs against current income since 1931 added up to $15,274,000. Chairman Reed was ready for a major accounting operation. Last week he asked stockholders to note that investments abroad--which in 1939 amounted to $24,704,389--had been written down to $13,243,000, that a $3,000,000 "war contingencies" fund had been set up to cover additional losses. These write-downs had put a $14,416,140 deficit into the company's earned surplus account. So he asked his stockholders to write down their 10,158,738 shares from $90,702,953 to $71,111,116, credit the $19,591,787 difference to surplus.

Extraordinary fact about 1939's foreign operations: in spite of its foreign grief the company pocketed $3,192,580 in foreign dividends (mostly pre-war). Thus Chairman Reed's scaling down of European assets was an exemplary piece of conservatism. Hereafter what Radiator recovers from its European investments will be mostly velvet.

Another firm with a lot of money lying over the ocean is Canada's International Nickel Co., which besides being a big copper and platinum producer is the world's nickel industry (1939 sales: 210,194,135 Ibs., up 27% to a record high). Nickel's President Robert C. Stanley's first worry is a $6,723,908 Finnish investment, of which more than half was made last year. By last week, all of this had been offset by reserves set up out of Nickel's earned surplus ($68,812,138 at year's end after all charges). Of 1939's new investments of $8,598,286, another $2,101,338 was spent in Great Britain.

In one respect Nickel is fortunate. Britain does not forbid the payment of dividends to its dominion, Canada. But to offset the decline in the Canadian dollar (to 88-c- Dec. 31), $2,481,079 was charged off against surplus. By end of last week, the Canadian dollar had slipped to 81.87-c- . This exchange drop was partly an advantage, because it gave Nickel the choice of selling cheaper (and more) or getting a higher price (in Canadian dollars) in the U. S., which is the biggest market for nickel.

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